Land with iPhone SE, Expand into Wearables & Services

The new iPhone SE value proposition will fractionally expand iPhone market share, which has hovered in the high teens for the past four years. More importantly, in the hands of new first-time Apple customers, the company will have new opportunities to cross-sell AirPods, Watch, and Services, adding to its base of 1.5B active devices. Ironically, on the day Apple announces a new phone, it’s important to note that Apple is no longer an iPhone story (51% of revenue down from its peak of 69%). The company’s diversified and tightly integrated hardware, software and services are the foundation of greater long-term revenue visibility. Other highlights:

This is the second generation SE. The first generation was released in March of 2016 at the same $399 price.

While the techs specs lag more expensive iPhones, it represents the best value in the product line up.

We believe the new iPhone SE will account for about 20% of total iPhone units over the next year, compared to our estimate that last year’s SE versions accounted for 13% of units. This means the SE will likely be the second-best-selling iPhone model behind the iPhone 11. We’re modeling for 153m total iPhones over the next 12 months and expect the new SE to account for about 30m units.

The iPhone SE will appeal to a combination of customers who, in the past, purchased secondhand iPhones or Android devices.

Based on our continued observations of Apple’s online lead times, we believe the production has improved and is nearing regular capacity.

Marching Forward

Today’s release is a powerful reassurance that Apple is moving forward, releasing products in the face of dire predictions for production and supply chain disruptions. This is evidence of directional improvement in the supply chain and production along with a well-capitalized company. Apple is making product decisions to advance the long-term (win new customers with the less expensive SE and sell them wearables and Services in the future).